The Building Tradesman Newspaper

Friday, June 17, 2011

By The Building Tradesman

(By Gordon Lafer)

With a few Republican-sponsored right-to-work bills waiting in the wings for legislative action in Lansing, organized labor is hoping the GOP won’t have the stomach for taking on such a divisive issue, but no one knows until the voting starts. Below is more ammunition against making Michigan a right-to-work state.

Sen. Jim DeMint (R-S.C.) has a new study touting his state’s “right to work” environment as a model of economic development.

But the truth is DeMint is promoting policies that force hard-working Americans to compete against each other for low-wage jobs with scant benefits and no hope for a secure retirement. DeMint’s study claims that states with “right to work” laws – which make it harder for workers to join unions – have better economies than the rest of the country.

He points to high population growth in the 22 right-to-work states – implying right-to-work laws are the cause. But this is nonsense. Warm weather and sunny beaches have more to do with why retirees flock to Florida and Arizona than labor laws.

What do you get when you take the warm weather out of the right-to-work equation? You get Iowa – the only right-to-work state in the industrial Midwest. And how has Iowa done economically? Over the last 30 years, Iowa has ranked 46th out of the 50 states for job growth.

DeMint’s promotion of South Carolina as a model for economic development also flies in the face of economic reality. If we compare South Carolina with New Hampshire – where “right to work” legislation is facing a vote in the state legislature – we find that by any measure, South Carolina should be trying to figure out how to be more like New Hampshire. Not the opposite.

At the end of 2010, South Carolina’s unemployment rate was 10.7 percent – nearly double that of New Hampshire. South Carolina’s poverty rate is also double that of New Hampshire; while its median income is $23,000 lower.

The rate of new business openings was 25 percent faster in New Hampshire than in South Carolina. When it comes to “new economy” firms – the high-tech, high-wage employers that every state seeks – New Hampshire is ranked No. 11 most attractive in the country, while South Carolina ranks No. 39.

But any economist knows that comparing the average economic performance of diverse states that share a single law is not an exact science. Other economic factors must be weighed. After all, if average growth rates were all that mattered, DeMint should be urging us to emulate Scandinavia – whose economic growth significantly outpaces our own — and where more than 70 percent of workers are union members.

In fact, what scientific analysis of right-to-work laws reveals is the opposite of DeMint’s suggestion. These laws have no effect on job growth. But they do lower wages – for both union and non-union workers – by about $1,500 per year, even after accounting for cost of living differences. They also lower the likelihood that workers will have access to health care and a secure retirement through their jobs.

This fits with the primary goal of right-to-work laws: to lower wages in order to lure out-of-state manufacturers. But to the extent this strategy may have worked in the 1970s or 1980s, it does not today. In the global economy, companies looking for cheap labor are likely to move to China or Mexico, not Iowa.

DeMint is entitled to his anti-union opinions. But lawmakers are entitled to know the difference between scientific fact and passionate ideology. The record shows that right-to-work laws lower living standards while doing nothing to increase jobs.

(Mr. Lafer is a professor at the University of Oregon and a research associate of the Economic Policy Institute. He is the author of Does Right to Work Create Jobs?)